Thinking about your own mortality is never going to be easy, although doing so could help to reduce stress for your family when you pass away. As dealing with a loved one’s finances when they die can make a difficult situation even more stressful, getting your wealth in order to help ease the burden could be a huge help to those you love.
As December is the month of Grief Awareness Week 2024, we’re looking at actions you can take to help your family deal with your estate when the time comes. The week, which takes place between Monday 2 and Sunday 8 December, aims to raise awareness of grief and normalise conversations around it.
So with this in mind, discover five actions you could take to ensure it’s easier for your loved ones to deal with your estate, which in turn, could help them while they are grieving.
1. Keep a record of your assets
If you have several pensions, bank accounts and investments, it could be difficult for your loved ones to locate them after your death. Keeping a record of them will allow those dealing with your estate to find them much more easily.
It also makes sure that none of your assets are lost because your loved ones are unable to locate them. All that said, if you do record your assets, please be sure to keep the information safe and secure.
2. Understand your Inheritance Tax position
If you thought Inheritance Tax (IHT) is only paid by the rich and famous, you may need to think again. One reason for this is that the NRB, which is the amount you’re allowed to have in your estate on death before the tax is charged, has been frozen until April 2030.
This means it will remain at between £325,000 and £1 million, depending on your situation, until then. As such, if your assets increase in value while the NRB remains static, your estate’s exposure to IHT could increase.
It should also be remembered that after April 2027, any unused pension pot that you have will also fall into your estate for IHT purposes. Because of this, your IHT liability could increase dramatically in the future.
It’s not all bad news though, as a financial adviser can help you to understand the actions you might be able to take to reduce your estate’s exposure to the tax.
3. Consider financial protection
Financial protection means you can be assured that whatever happens to you, your loved ones will be financially secure over the long-term. For example, taking life cover could ensure your family receives a lump sum that could be used to pay off the mortgage or settle an IHT charge.
This could ensure they can stay in the family home if the worst happens to you, or allow them to receive more of your wealth as it won’t be reduced by the tax charge.
4. Write a will
While a will isn’t strictly ‘financial’, not having one in place when you die could have implications for your family’s long-term wealth. As a will is a legal document that sets out who you would like your assets to go to when you die, it ensures your wealth will be passed on to family and friends as tax-efficiently and as smoothly as possible.
If you don’t have a will, your belongings will be subject to intestacy rules. This means your estate will be shared out among living relatives in a prescribed way.
Worse still, if you have a family but are not married, your nearest and dearest will not be considered under intestacy rules. This means that without a will in place, they’re unlikely to receive anything from your estate, even if they’re financially dependent on you.
5. Consider using a trust
Creating a trust can provide you with more control over how and when your wealth is passed to loved ones, and how they then use it. In addition to this, trusts can protect your estate from ‘sideways disinheritance’. This is where your children or grandchildren may be deprived of their rightful inheritance if your surviving spouse remarries.
In addition to this, trusts can also:
- speed up the process of passing your estate to loved ones
- ensure your family’s long-term financial security after your death
- reduce your estate’s exposure to Inheritance Tax.
Get in touch
If you would like to discuss whether you have an IHT liability and how you could potentially mitigate it, or the actions you could take to help your loved ones deal with your estate when you die, please contact us.
As your financial advisers are also licensed estate planners, they can also help you to create a will, or trust, that’s the most suitable for your financial situation. To arrange a no obligation meeting with one of our advisers, call us on 0333 010 0008 as we’d be happy to help.
December 2024